Depreciation Report

As of December 13, 2011, the Strata Property Act (SPA) in British Columbia required all strata corporations to establish a Depreciation Report (commonly referred to as a Reserve Fund Study in other jurisdictions). The intent of this requirement was to ensure strata corporations conducted long-term planning for the maintenance and repair of common property and assets.

Changes to Depreciation Reports

In 2020, the Province of British Columbia amended the Strata Property Act to introduce additional changes, including updates to depreciation report requirements. While some amendments were implemented immediately, others were delayed. One significant delayed amendment concerns the removal of a strata corporation's ability to waive obtaining a depreciation report, reflecting the government's commitment to ensuring consistent financial planning and maintenance practices across all strata corporations.

Effective July 1, 2024, sections 94(2) and 94(3) of the SPA was replaced with a mandatory requirement for all strata corporations (except those with fewer than five units) to prepare a Depreciation Report by specific deadlines, followed by updates every five years thereafter.

Compliance Deadlines under the New Regulations

The deadlines for compliance depend on a strata corporation's location and the date of its most recent depreciation report:

Strata Corporations with Depreciation Reports Completed in 2021 or Later
- These strata corporations must complete their next depreciation report five years after the date of their most recent report.
- For example, if a depreciation report was completed in July 2023, the next report will be due in July 2028.
Strata Corporations with Depreciation Reports Completed Before December 31, 2020
- Metro Vancouver, Fraser Valley, and Capital Regional Districts: A new depreciation report must be completed by July 1, 2026.
- Outside These Areas: A new depreciation report must be completed by July 1, 2027.
Newly Established Strata Corporations (After July 1, 2024)
- For strata corporations established between July 1, 2024, and July 1, 2027, the first depreciation report must be completed within two years of the first annual general meeting (AGM).
- For strata corporations established on or after July 1, 2027, the first depreciation report must be completed within 18 months of the first AGM.

Why a Depreciation Report is required?

The purpose of the Depreciation Report is to determine whether the amount of money in the reserve fund and the amount of collected contributions are adequate to provide for the expected costs of major repair and replacement of the common elements and assets of the Strata Corporation. The objective is to forecast future major repair or replacement of common elements of the Strata Corporation, to lower the risk of unexpected repairs, and to ensure that proper funds will be available for those repairs when necessary. This is done over a period of 30 consecutive years.

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Compliance Deadlines under the New Regulations

For strata corporations established on or after July 1, 2027, the owner developer is required to fund the cost of preparing the first depreciation report. This is achieved by contributing to the Contingency Reserve Fund (CRF) prior to the first AGM. The contribution must be the lesser of:

(a) $5,000 plus $200 for each strata lot in the strata corporation; or

(b) $30,000.

Summary of Key Changes

The original 2011 requirement provided strata corporations with some flexibility to waive the preparation of a depreciation report. However, the upcoming changes in 2024 will make depreciation reports mandatory, eliminating the option to waive them and ensuring regular updates every five years. These changes aim to standardize long-term planning and maintenance practices across British Columbia, promoting financial stability and proper asset management for all strata corporations.

What does the Depreciation Report include?

Identifying the common elements of the building that are the Strata Corporation's maintenance responsibility, as described in the legal documents of the Corporation, including the legal documents, warranties, and Schedules of the Strata Corporation
Review of the financial situation, reported deficiencies and concerns, present maintenance, and any other pertinent information including the review of the following:
- Audited financial statement of the Strata Corporation
- Reciprocal cost sharing agreements of the Strata Corporation
- Review the most recent Depreciation Report of the Strata Corporation (if applicable)
- Review the most recent notice of future funding of the Reserve Fund paid to the owners (if applicable)
The 30-year period Depreciation Report is based on inventory, quantification, and inspection of the building(s)'s common elements components including the following:
- Interview with key building operations personnel regarding known problems, repair history, and future maintenance or replacement plans
- Visual inspection of each of the common components where practical, to identify existing observed problem, general estimation of the current condition, and the general assessment of the remaining life expectancy for each of the common elements

Who can prepare a Depreciation Report?

At Ben Engineering, all Depreciation Reports are prepared by a registered Professional Engineer (P. Eng.) with the Association of Professional Engineers and Geoscientists of B.C. (APEGBC).

How often should a Depreciation Report be completed?

The regulation specifies that a new Depreciation Report should be completed every three years or within 18 months after a three-quarter vote to exempt the Depreciation Report has passed. The report should include a site visit for a visual inspection of the inventory items.